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Does an IVA affect your credit rating?

Posted 06 October 2016

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Find out what effect an IVA will have on your ability to borrow.

There’s a lot to consider when you’re looking at starting a debt solution like an Individual Voluntary Arrangement (IVA). Will you be able to afford the payments? Is it right for you?

And what’s more, you might have a few further questions on how an IVA will impact your life in general.  For example, will it have an effect on your credit history and your ability to borrow? Let’s take a look at what will happen to your credit history while you’re on the solution – and how you can start building it back up afterwards. 


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IVA and credit history

An Individual Voluntary Arrangement (IVA) will remain on your credit history for six years. This happens with any debt solution, as you’re not sticking to your original credit agreement – you’re changing the way you’re paying back what you owe.

An IVA is a formal solution and your details will be added to the Insolvency Register if you start one. Your IVA will stay on the Insolvency Register for however long your IVA stays open and three months after it closes. These three months just allow time for the admin necessary to remove your details. 

Normally your IVA will remain on your credit file for six years from the date that it starts – but this is assuming that the IVA finishes when it’s due to. It could be longer than six years, if your IVA lasts longer than expected. If your IVA fails or you happen to finish it early, it will still stay on your credit file for six years from the date that it started. 

If anyone credit checks you while your IVA is on your credit history, they will be able to see it. And if you’re applying for certain services where you might be credit checked – like a mobile phone contract or a rental agreement – your IVA might mean these service providers are more likely to reject you. 

You can’t borrow money while you’re on an IVA without permission from your Insolvency Practitioner (IP). But if you’ve only recently completed your IVA and you’re looking to borrow again, your IVA might still appear on your credit history if it’s still within the six years. If this is the case, you might find this harder as some lenders may turn you down when your IVA shows up on their search. And if they don’t reject you, they could accept you at a higher interest rate. 

But does it matter?

Starting an IVA means there’ll be further damage to your credit history for six years. However, it’s important to keep in mind that if you’re considering an IVA, it’s likely that your credit history will have already been damaged by any defaults and CCJs you may have. 

When you also consider the advantages of an IVA it can still be the best option for some people, even when you take the credit history damage into account. It’s also important to remember that an IVA would only be recommended to you in the first place if the pros outweighed the cons in your particular case. 

After it’s over

After your Individual Voluntary Arrangement (IVA), you might want to look at getting your credit history back under control. You might not be thinking about borrowing money any time soon but as we mentioned, your credit history can affect your ability to get other services as well.

When your IVA completes, it is possible to start rebuilding your credit history and repairing some of the damage. An important part of that is making sure that your credit history actually shows that you’ve completed the solution successfully. Your solution provider should send you an IVA completion certificate as well as a closure report to your creditors asking them to update their records with the credit reference agencies.  

It’s also a good idea to register to vote at your current address. You don’t actually have to vote if you don’t want to, but this means you’re on the electoral register, and creditors will use this to verify your identity when they’re credit checking you. If you’re looking for more ways to improve your credit history after a debt solution, check out our blog.

Any more questions

The effect that an Individual Voluntary Arrangement (IVA) will have on your credit history is definitely something you need to think about seriously before starting the solution. But there will be other things to consider as well – if you can afford the regular payments and if it’s the best way for you to get debt free, for instance. 

Speak to a debt advisor if you’re not sure whether or not an IVA is right for you. They’ll be able to take a look at your circumstances and tell you whether you should go ahead with one. They can also give you information about the different debt solutions available so if you’ve got any questions about how something works, don’t be afraid to ask.


by Emily Bancroft

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To find out more about managing your money and getting free debt advice, visit Money Advice Service, an independent service set up to help people manage their money.